It’s Mortgage Principal, Not Principle

Principal vs. Principle

Attention grammar police

These are two very different words

That I still constantly see being used incorrectly

By those working in the mortgage industry!!

Allow me to get testy about grammar for a minute (moment). I know I know, it’s lame to be a member of the grammar police and go after folks for using a word incorrectly. I’m sure I use words incorrectly all the time.

In fact, maybe I should have used a synonym of incorrectly that second time around to mix things up.

But in this particular case, we’re talking about two completely different words that sound exactly the same but have entirely different meanings.

And they often get confused in the mortgage world, with the word “principle” typically used in place of the correct “principal.”

The scary part is that mortgage professionals and high-ranking journalists make this mistake all the time.

Perhaps that’s why I have a bone to pick.

What Is Mortgage Principal?

The word principal means first

But when it comes to money

It is defined as the original amount invested or loaned

In other words, it’s your loan amount

Well, the word principal generally means “first.” That’s why the head of a school is known as the principal, because they’re basically the one in charge.

When it comes to money, the word principal takes on a different meaning; the original amount invested or loaned.

So in the case of a mortgage, the principal balance would be the loan amount, which declines over time as it is paid off.

If you were to take out a $200,000 mortgage, that $200,000 would be the principal balance. And each month you would make a payment with some portion going toward the principal and some going toward interest.